We see them by sunlight scattered by the crystals which are
not large enough to show iridescent effects.
Their bluish coloration is likely a result of absorption
of red light by the stratospheric ozone layer.
Occasionally they show reds and golds from the colour
of low sunlight illuminating them.

NLC formation requires a combination of very low temperatures,
a source of water vapour, and nuclei on which ice can grow.

Low Temperatures

Ice does
not form at the low pressures of the mesopause unless the
temperature is below -123°C. These
low temperatures only occur during a few weeks around
the summer solstice and the surprising combination
of summer and low temperatures is a consequence of global
circulation in the middle atmosphere. The very lowest temperatures
(down to ~ -160°C
) occur a few km above the cloud level and it is surmised
that the ice crystals initially form there.

Water Vapour

The water vapour
source is not known with certainty. The mesosphere is extremely
dry but some water might be carried and
across gaps in the tropopause and lofted upwards by atmospheric gravity
waves.
Another potential source is methane. This reacts in the
stratosphere with hydroxyl radicals, OH, to form water molecules.
Rocket exhausts deposit water into the mesosphere and some
have been associated with specific later cloud formation but
this is not considered a major effect.

Crystal Growth Nuclei

The source of
nuclei is equally problematic. Extraterrestrial meteoric dust
has been proposed. Volcanic and tropospheric dust is another
possibility and the first recorded sighting of NLCs in 1884
was shortly after the Krakatoa eruption.

NLCs displays are thought to be becoming more frequent, brighter
and visible at lower latitudes. Human activities might be contributing.
The summer mesopause is getting colder, possibly because of the
cooling effect of increased atmospheric carbon dioxide concentrations.
Methane concentrations and mesosphere humidity are also increasing.
The AIM spacecraft was launched in 2007 specifically to investigate
NLCs, their formation and possible links to global climate.